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I've got a bunch of good information from other people's posts on here and thought i should contribute a little.

I saw one day i had some oil on my driveway and i didn't think it could be from me because i only had 90,000 kms on my car. Anyways, I lifted the car just to make sure and saw my diff was leaking, badly! I guess the bolts were coming loose over time and pretty much ripped the gasket while the oil was seeping out. Luckily i still had more than enough oil inside.

Since BMW doesn't make these gaskets for the E46 anymore, i had to buy something to make a new gasket with. I don't remember the name of it but you can buy this at any parts store.

I thought this was going to be very hard to do, but it was pretty simple. Mechanics told me that you need to take the diff out to have room to slide out the back cover, but you don't. You just need to remove a few things.

1st Loosen exhaust by removing hangers near the muffler. Use a string or rope to hold it so its not hanging there.

There were 3 bolts on the Diff holding it in place;

2 bolts facing the rear (18mm)
1 bolt facing the front (21mm)

Then you need to take off the dive axles, with a 12mm or 14mm HEX (can't remember exact size)

Once you remove those, you have to un-hook the rear sway bar to make room. (2 bolts on each side) You don't need to remove it, it just needs to be able to swing down so you can have that extra 1-2 inches of room.

Then simply remove Differential cover and clean the ends where the gasket was. Then spread the new gasket seal around the whole cover and Diff. Put it on carefully so it doesn't smear all over and tighten bolts. Let it dry for at least one full day WITHOUT OIL inside the Diff. After, simply add the Diff oil (just under 1L) and make sure everything is tight and back together.

I added some pics, hope this helps some of you.
Let me know if you guys have any questions.

Very interesting and useful DIY. Glad you are giving. Only if more people are like that, it would be a wonderful world.

There are a few things I would like clarification on please:

1. The exhaust wasn't removed completely, but was only lowered from the rear end ?
2. Why was the output shafts unbolted ? From your pictures, these didn't seem to be in the way of the differential cover.
3. You mentioned 3 differential bolts. Were these for the differential bushes ?
4. Was the purpose of removing the differential bolts to lower the differential itself ?

BTW, nice lift you've got there. If I had one, I'd go nuts.

On a side note, RealOEM and similar sometimes incorrectly indicate an item is discontinued when it is in fact available from the dealer, possibly in the form of an ungraded part. So, it's always a good idea to confirm with the dealer before tearing your hair out looking for an alternative solution.

1. Yes, you don't remove the exhaust, just remove the hangers and leave it hanging with a string.
2. It's just easier to move the differential around. Less stuff holding it in place.
3. I'm not sure what you mean, but there are only 3 bolts holding it in place. One on the 3rd pic, just above the sway bar to the left and the other was on the back side of the diff facing the front of the car.
4. Yes, because you need the room to reach the top 2 bolts for the cover. Otherwise you can't reach them.

I did confirm with Both BMW dealers in my city and neither of them had it. I went to several auto parts store and they didn't have it either. So i asked my mechanic what i could do and he told me to use this paste and make my own.

I have an '03 ZHP and have noticed some oil on the bottom of my diff. Do you recall what your leak looked like? I would think if any of my shaft seals were leaking, oil would be spun all over the place, which is not the case at all. I'm thinking (and hoping) its just the rear cover...

I had the same differential leak from my '03 330i zhp at 141k miles coming from the diff cover. I used this excellent write up to perform the fix. The only issue I encountered was removing the two front facing 18mm bolts from the diff mount because there wasn't enough space to back out these bolts without removal of the reinforcement brace. This required removing 6 bolts and and 2 small bolts for a heat shield. See step 4 from this write up.